Shareholders Not Playing Games at Big Oil Annual General Meetings

Major fossil fuel producers are holding their annual general meetings (AGMs) this month amid mounting pressure from investors, increasing risks of legal liability for climate damages, and heightened scrutiny of their lobbying and public policy advocacy. BP and Royal Dutch Shell host their AGMs this week; ExxonMobil and Chevron will follow next week.

If shareholder meetings were classic game shows, and investors were keeping score, fossil fuel companies would be coming up short.

Investors demand Truth or Consequences about a 2°C world

Investors with a combined total of more than $10 trillion in assets under management are demanding that major oil and gas companies demonstrate support for the Paris Climate Agreement. In an open letter published in the Financial Times, fund managers including Aberdeen Standard Investments, BNP Paribas Asset Management, Fidelity International, and HSBC Global Asset Management Ltd. urged companies to be more transparent about how they are planning for a world in which global temperature increase is kept well below 2 degrees Celsius (2°C).

Specifically, the signatories called on oil and gas companies to make tangible commitments to reduce their carbon emissions substantially, consider the impact of emissions from the use of their products, and clarify how their investments are consistent with a 2°C world. (Check out this new report by Carbon Tracker and my recent blog highlighting these and other unanswered questions in ExxonMobil’s and Chevron’s reports on their plans for a 2°C world).

At tomorrow’s AGM, Shell faces a shareholder resolution by the Dutch organization Follow This calling on the company to set and publish targets that are aligned with the Paris Climate Agreement’s well below 2°C goal. Similar resolutions have received small but growing support from Shell shareholders over the past two years.

The United Kingdom responsible investment charity ShareAction notes that Shell’s announced ambition to reduce its carbon footprint is not a target, is not aligned with the goals of the Paris Climate Agreement, and would allow the company’s absolute emissions to increase. ShareAction therefore encourages investors who publicly support the Paris Climate Agreement to vote in favor of the Follow This resolution.

Although BP shareholders did not vote on any climate-related proposals this year, global warming was nonetheless a hot topic at the company’s AGM. As I observed in a Twitter thread about BP’s annual report, the company is wisely investing in renewables like wind and solar—but it is also upping natural gas production, and its strategy does not align with the Paris Climate Agreement’s well below 2°C goal or meet the expectations set out in the investor open letter.

(Legal) Jeopardy: Climate liability lawsuits gain momentum

One thing BP failed to mention in its annual report was the rising tide of climate liability litigation. (King County, Washington, filed the most recent lawsuit against BP and other major fossil fuel producers, seeking to hold them accountable for ”knowingly contributing to climate disruptions” and putting residents “at greater risk of floods, landslides, ocean acidification, sea level rise, and other impacts.”)

BP’s omission is particularly glaring in light of the recommendations issued last year by the Task Force on Climate-Related Financial Disclosures (TCFD) calling for consistent, comparable, and timely disclosures of climate-related risks and opportunities in public financial filings. In stark contrast, several of BP’s peers—including Shell, ConocoPhillips, and Peabody Energy—explicitly mentioned lawsuits filed by US municipalities as a shareholder risk. Peabody Energy did so despite a court ruling (appealed by the plaintiffs) that the company is shielded from liability by its bankruptcy filing. Shell may be sued in the Netherlands if it fails to align its business model with the Paris Climate Agreement.

This week, a federal judge in California will hear oral arguments in the fossil fuel companies’ motion to dismiss the lawsuit brought by San Francisco and Oakland over sea level rise brought on by climate change. Communities across the country and around the world that are struggling with enormous costs of climate damages and adaptation will be closely watching the ruling in this case.

Let’s [Not] Make a Deal with industry groups on climate change

There have been significant advances in fossil fuel company transparency about climate lobbying since last year’s AGMs. ConocoPhillips has expanded its disclosures of lobbying and other public policy advocacy following dialogues led by Walden Asset Management, and in response to shareholder resolutions that won substantial support in recent years—as well as recommendations in UCS’s Climate Accountability Scorecard. Valuable updates to the company’s website include an explanation of board and senior management oversight of lobbying, details on lobbying priorities and grassroots lobbying, and easily accessible information on lobbying expenditures.

This move by ConocoPhillips followed a report by BHP Billiton Limited on the material differences between the company’s positions on climate and energy policy and the advocacy positions on climate and energy policy taken by industry associations to which it belongs. BHP took action based on its review, severing ties with the World Coal Association. ConocoPhillips, BP, and Shell have all left the American Legislative Exchange Council (ALEC) in recent years, with Shell explicitly citing ALEC’s stance on climate science as the reason for its departure.

However, inconsistency between major oil and gas companies’ stated positions on climate change and those taken by their trade and industry groups remains a serious concern for investors. BP, Chevron, ConocoPhillips, ExxonMobil, and Shell all maintain leadership positions in trade associations and other industry groups that spread disinformation on climate change.

All five companies are represented on the board of the American Petroleum Institute (API)—notorious for its 1998 memo outlining a roadmap for climate deception, claiming that “victory will be achieved when…average citizens ‘understand’ (recognize) uncertainties in climate science.” API was warned about global warming as early as 1959.

BP, ConocoPhillips, ExxonMobil, and Shell are represented on the board of the National Association of Manufacturers (NAM), and Chevron is a NAM member. The NAM website is virtually silent on climate change, downplaying the issue even as NAM’s Manufacturers’ Accountability Project (MAP) attacks climate scientists and communities aiming to hold fossil fuel companies accountable for climate damages attributable to their business.

Following last week’s ConocoPhillips AGM, I received a vague response to a question I posed about what the company is doing to ensure that the public policy positions of NAM, API, and the US Chamber of Commerce are aligned with its own and environmentally responsible. To be a leader on transparency, ConocoPhillips ought to provide examples of what the company considers a “reasonable compromise” with industry groups on climate change—and explain how such dealmaking squares with its own climate policy priorities.

Shareholders are raising similar questions with BP and Shell about their leadership roles in NAM, API, and the Western States Petroleum Association (WSPA).

And next week, Chevron and ExxonMobil shareholders will vote on proposals for annual reporting on direct and indirect lobbying and grassroots lobbying communications. The filers of the ExxonMobil resolution, led by the United Steelworkers of America, are urging shareholders to vote yes. The proponents highlight a “Trade Association Blind Spot,” pointing out that ExxonMobil does not disclose its trade association memberships, trade association payments, or the portions of those payments used for lobbying. Arguing in favor of the resolution, the 26 co-sponsors “remain concerned that inadequate state lobbying and trade association disclosure by ExxonMobil presents significant risks to the corporation’s reputation.”

I always hated The Gong Show, but it would be tremendously satisfying to see the public and investors gong Big Oil CEOs off the stage if they continue their pathetic performance on climate change—failure to plan for a carbon-constrained world, failure to disclose climate risk, failure to renounce climate deception.

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